Wisdom needed- Downsizing Renting vs Buying

[NorthNola]

Hi all- looking for some sage advice on downsizing. I would love to hear your experiences - pitfalls or delights, unexpected issues and upsides and downsides. What did you wish you had known or checked into first before you downsized and made your choices. What were some unexpected costs or savings. I'd love a bit of your 20/20 hindsight vision.

A little background on finances and lifestyle: I share a home with my sister (I 64 Semi FIRED at 58 PT 40k from PT job, 50k from investments. sister 70 fully retired 30k income from SS and investments). We’ve had a vacation condo for 17 years and upgraded to a larger unit 5 years ago (425k value with 200k mortgage) and want to spend more time there - 3 months Jan-March, 2-3 weeks in summer and again 2-3 weeks in Fall. A few small additional trips during the year and 1 international trip is our norm.

Investments doing well at 2M and with 3.5% WR providing us with a good income along with PT job and SS. Sister on medicare and I have great health insurance through work. We LWM but definitely spend what we bring in. I work with a FA and monitor our savings. We love the Semi and retired lifestyle and I can work (24 hrs/week) from anywhere. We know these are our "Go-Go" years and things will slow down or change down the road.

What put the fire under us is that our primary residence (175k value and have owned for 27 years) has a large yard and pool. It is maintenance heavy, and our dear neighbors have helped us with the upkeep for years. They are downsizing and moving - just a little faster and earlier than we had planned. They have been lifesavers (or lifestyle savers!) but we understand and grateful for all the years of help. It will be physically too much for us to keep up with for any length of time nor do we want to. (Health generally good but for some back issues and arthritis in both of us.) And an added expense if we can get someone for lawn care for sure. So our 5 year downsizing plan just kicked into a 1-2 year plan!

I’m looking for your insight and thoughts and experiences as to buying a standalone (ideally one floor patio type) home vs a condo or renting an apartment. What did you like and what didn’t work out well. After selling the primary home I would look at financing about 100k if I bought, so looking at a 275-320k condo or home. That price range gets me more space in a standalone house but a big factor would be the ability to just shut the door and go for months at a time which is more along the condo or apartment route. We would ideally need a 3 bedroom as we have a large sewing, crafting, costuming hobby (its Mardi Gras oriented so IYKYK!). Just a prelim look and the price difference between a 2 bedroom vs a 3 bedroom in a condo or apartment is significant. Buying seems to be cheaper per month than a 3 BR rental. I fear rent increases but fear appliance and roof and HVAC replacements as well!!

Thanks in advance for your wisdom and insight! It will help us as we start looking around at the next chapter.

 

[Gotadimple]

Real estate is different in every part of this country. What you can sell you house for, how many improvements made, and how much capital gain you will get from the sale all affect how much cash you walk away with - before you pay IRS. And before Medicare can potentially slap you with IRMAA. These are tax matters that affect how much you have to spend on a new place.

House v Condo. That's a lifestyle cost. 3 bedroom homes and 3 bedroom condos are more expensive than 2 bedroom. In a home you have 100% responsibility for all repairs and their costs. In a condo you generally have a share of costs based on the per centage of the complex you own. You still have monthly HOA dues, property taxes, and should the HOA not be financed well you may encounter special assessments to cover large repairs like roofing or painting. Your general housing expenses remain stable - unless your county assessor increases taxes or your adjustable rate mortgage goes up.

Once you factor in all those costs, you may find it cheaper to rent a home or an apartment or even a condo. But rent isn't just rent because it may not include common utilities like water, sewer, or garbage.

I am currently making these types of decisions. You need to pencil out everything both owning and renting and ask how long you intend to stay there. That should lead you to the best decision for you.

 

[bloom2708]

We have tossed around renting for 1 year after we downsize.

With a paid off mortgage our monthly cost is ~$900. Property taxes, insurance, fixed maintenance/upkeep type things.

If a 2 bedroom apartment is $2k, that is only $1,100 more per month, plus the few things to pay. Plus we'd have $500k to save/invest/spend.

The hard part is the lifestyle choices. Going back to a multi-family scenario comes into play with many rentals and condos. Downsizing stuff. Storage. Car parking. Pets (we have none). Kids returning to home. Holiday space.

Our oldest kid moved into a brand new smaller complex. Underground parking. Pretty decent storage. $2k bonus for signing a 12 month lease. I could do it, I'm not sure my wife will. There are some beautiful high end condos I like. ~$400k for a 2 bed. Property taxes high. %00 HOA fee. We'd end up with a higher monthly cost which is kind of sad. But, I'd like to get away from mowing and snow removal.

Make a matrix of must haves and costs and see where you end up. What things are you flexible, what things are you firm on. Either you or the spouse. I agree that a lot will be determined by where you are and the local real estate and rental market.

 

[aja8888]

We have tossed around renting for 1 year after we downsize.

With a paid off mortgage our monthly cost is ~$900. Property taxes, insurance, fixed maintenance/upkeep type things.

If a 2 bedroom apartment is $2k, that is only $1,100 more per month, plus the few things to pay. Plus we'd have $500k to save/invest/spend.

The hard part is the lifestyle choices. Going back to a multi-family scenario comes into play with many rentals and condos. Downsizing stuff. Storage. Car parking. Pets (we have none). Kids returning to home. Holiday space.

Our oldest kid moved into a brand new smaller complex. Underground parking. Pretty decent storage. $2k bonus for signing a 12 month lease. I could do it, I'm not sure my wife will. There are some beautiful high end condos I like. ~$400k for a 2 bed. Property taxes high. %00 HOA fee. We'd end up with a higher monthly cost which is kind of sad. But, I'd like to get away from mowing and snow removal.

Make a matrix of must haves and costs and see where you end up. What things are you flexible, what things are you firm on. Either you or the spouse. I agree that a lot will be determined by where you are and the local real estate and rental market.

Hire out mowing and snow removal. In the long run, that stuff is not expensive.

 

[bloom2708]

Hire out mowing and snow removal. In the long run, that stuff is not expensive.

Mowing isn't bad. Snow removal in Fargo, ND can be quite expensive.

We have a large, driveway with a turn and the neighbor to the SE is close. That is where a snow removal company would need to move the snow.

We also have 3 of 5 bedrooms empty and it will be 4 of 5 when kid 3 heads off to college.

Downsizing is not for everyone, but for some it is a good option.

 

[LateToFIRE]

We too are going through a downsizing phase, both in order to save on costs, but also because owning two full-size homes is just too labor intensive even with the army of part-time hired help we have working on each property. The thing is, managing the help is a job unto itself. Even when we had a property manager for our vacation home, we still had to manage the manager himself to prevent runaway spending (we used to call him the Cadillac Man, cause the solution to any problem/repair would invariably be the most expensive solution he could think of). For this reason, if we go with another 2nd home, it will either be a rental apt or a condo - we've sworn to only one costly, free-standing home at a time.

 

[aja8888]

Mowing isn't bad. Snow removal in Fargo, ND can be quite expensive.

We have a large, driveway with a turn and the neighbor to the SE is close. That is where a snow removal company would need to move the snow.

We also have 3 of 5 bedrooms empty and it will be 4 of 5 when kid 3 heads off to college.

Downsizing is not for everyone, but for some it is a good option.

Yeah,lots of snow! Do you have a truck with a plow? When we lived in Connecticut on three acres and a long driveway, I had a Blazer with a plow! Now I am in south Texas!

I downsized after my wife died in December 2022. I went into a 1450 sq ft small one level house. I got rid of 1/2 our belongings and it should have been more. Moving is expensive and a royal PIA. I love the smaller house!

 

[MC Rider]

Imho there is a lot to be said for not having a landlord (or an HOA).
Otoh you have to handle all repairs and mint.
You get to make the call.

 

[RetiredHappy]

Cheaper to have hired help than to move. I had always lived in a single family home and we bought a high-end penthouse condo (3000 sq ft) as a 2nd home. After we retired, we moved into our "2nd" home and after 4 years, I had itchy feet and wanted to move back to a single family home. A condo worked really well for us when we were only spending 3 months a year there. But living in a condo feels differently than living in a single family home. It just felt more confined even though it was 3000 sq ft with 3bd, 3.5ba and with to-die-for views.

In Jan 2021 we sold the condo and moved back into a single family home of the same size. We hire a pool company to maintain our pool, a landscape company to do the yard and pest control company. We also have cleaners who come in every 2 weeks. Living in a single family home is no more work than living in a condo.

 

[MC Rider]

Living in a single family home is no more work than living in a condo.


Maybe coordinating the work, but sounds like you have that on autopilot.

A condo puts you in a whole different environment than a house. You tend to have more space in a house.

 

[Teacher Terry]

In 2012 we downsized to a one story house that was 1400 sq ft. We installed Astro turf and made the yard low maintenance. Fast forward to a divorce in 2021 and I downsized to a 2 bedroom condo that is 855 sq ft. Personally for 2 people I wouldn’t go to less than 1400 sq ft.

I never considered renting as your rent increases and you have to move at the whim of the landlord. Plus I am particular about my home and like to remodel it to my taste. I also have dogs and that can be a problem with renting.

I love condo living and everything is done for me except inside my unit. It’s a lot less work than owning a house. I have made many friends in the building and we have a great time. It’s cheaper for me than renting.

 

[old medic]

Since you can make your PT $ from anywhere, and enjoy your condo you love, already own and still owe on.... Move there. Proceeds from the home sale can about pay that of, or invest someplace.

 

[Music Lover]

Mowing isn't bad. Snow removal in Fargo, ND can be quite expensive.

We have a large, driveway with a turn and the neighbor to the SE is close. That is where a snow removal company would need to move the snow.

Snow removal for the winter season would probably cost no more than 2 or 3 months of condo fees.

 

[Jimmie]

DW and I downsized from our 4500 sq ft home (no mortgage) in Denver to a 2000 sq ft rental home near Austin 2 years ago. It was a mental challenge getting over throwing away $2400 rent each month as well as the very hot weather. Rental home was only 4 years old but built as cheaply as the builder could get away with, which caused very high electric/gas bills when heating or cooling the home. Water was also very expensive. It was also very amusing to observe the HOA battles going on with the home owners in the development. When lease expired after 16 months of renting, we decided TX wasn't for us and relocated to western WA and bought a 2700 sq ft 3 yo home that has no HOA. We're very glad not having to pay rent anymore plus live in a beautiful location. I can honestly say we'd be terribly miserable if we had stayed in our TX rental home.

 

[MarieIG]

Hire out mowing and snow removal. In the long run, that stuff is not expensive.

This. I would not rush because your neighbors are moving. Hire out - and take your time investigating and planning your eventual move.

 

[meleana]

We downsized from a big house on lots of land in NY to a brand new, 1100 square foot, one level cottage with no land to speak of in New Hampshire. It's an owner board HOA community with a clubhouse and small pool and walking distance to the most popular lake and beach in the state. Activities run by the residents.Our homes here are right on top of each other but we still like having a house and no walls connected to others. Plus we have a garage and a full, walk out basement, a must for my husband and for storage. We have 2 cars so we only have to keep one in the small driveway.


Being the house is new maintenance is almost non existent.We did a few things to it when we moved in like putting in a whole house generator and radon mitigation system, a ceiling fan, medicine cabinets, etc- things like that. Still using some of our furniture from the other home- just a lot less of it. Didn't need to buy new.



The HOA takes care of almost all lawn maintenance, plowing the private road, trash removal. We are 70 and 68. Moved here 4 years ago. Best thing we ever did. I had almost no issues getting rid of stuff in terms of emotional. It just was a lot of work.



Having a small house is also less costly in terms of utilities and insurance. NH has no income or sales tax either.I'd say we have done pretty well and we like it a lot.